Why it's time for investors to keep cash levels amid tech rout: Expert

Oxbow Advisors Managing Partner Ted Oakley joins Yahoo Finance’s Kristin Myers to discuss the outlook on the markets, as tech stocks fall again.

Video Transcript

KRISTIN MYERS: So I want to start this conversation off with the question that you actually raised in your note, which was will investors buy the dip again. So I want to throw that question back to you. I mean, because after the lows that we saw in March, we saw some stocks-- I'm thinking Tesla here-- run up over 100%. I'm wondering if you think that there's going to be a large surge again after this sell-off as a lot of folks start gobbling up those stocks that are now on sale.

TED OAKLEY: You know, Kristin, I don't think so this time. I think the thing that happened then was you had the Fed really come with a lot of firepower during April and May. And while they may come with some more, it's sort of doubtful at this point, but maybe they do.


I think you would have to have something different than what we're seeing now. Because now, all of these things-- you know, they've gotten up to some fairly egregious price levels. And so you have to be careful at this point.

KRISTIN MYERS: So going forward, how bullish are you through the end of the year, over the next, you know, 12 months? And I'm asking because I was talking last week with Jeff Saut, and he said that he's seeing a level of 4,000 in the S&P 500. I'm looking now. It's at 3,345. Are you in line with that sort of estimation over the next 12 months? Where do you think markets are going to be going after this?

TED OAKLEY: Well, Kristin, I'm certainly not in a 20% move from here. I mean, you know, you have to look at it-- you know, the big FANG stocks are 26% of the market. So you need to watch those because they're the ones that have run the market here over the last four months. If they stay under pressure, you probably won't go higher. There's-- people are not wanting to switch over to value or anything like that. So I'm not that positive.

Well, we do own stocks. I will tell you, we're the highest cash we've been actually ever in the last 20 years. We were higher than that in '99. But we don't look for a lot of upside from here only because if you look at the earnings estimates now for '21, it doesn't give you any idea that there would be any reason to move up 20% from here. We just can't see you getting there.

KRISTIN MYERS: So let's say you do have fresh money that you want to put to work. You want to make something over the next couple of months. Where are you seeing value right now among growth, and where are you seeing growth right now among value?

TED OAKLEY: Well, good question, Kristin. I think what happens, on the growth side, you have to have-- like, we have about 200 companies that we look at, and they have to come within a range that we will purchase them. Now, I might say to you-- because this is an interesting question. A lot of new money that comes in, you have to decide on where you are.

Like, for instance for us, for new stock money, we probably wouldn't want to be more than about 30% to 50% invested right now. And we would buy the same names we already own, and some of those maybe drift back into even better buy zones than what they've been. But I don't think we go more than 50% right now.

And then on the value side, what we're looking for there and what we own-- which is a different strategy for us, but what we own are companies that are paying really nice dividends. They don't have a lot of debt, and we think they can make the dividend and make money over the next three years. And so we have sort of a split look at stocks. We have two different strategies. But both of them, that's how we would look at their growth value strategy right now.

KRISTIN MYERS: So we've heard a lot of people talk about how this week is particularly important, as this sell-off continues. So if you want to make a move, is today the day, Tuesday? Or should we be waiting-- or should someone who wants to get in, needs to wait a little bit later in the week, is this a Wednesday-Thursday question?

TED OAKLEY: Well, Kristin, I've probably been around as long as anybody you've interviewed today. And if I could answer that question, I probably wouldn't even been here. But I might say, if I hadn't done anything at all investing this year, I would probably go slow.

I'd maybe pick off a few names, maybe get up as high as 20%, 25%. But I think you've got a longer runway here to take a look at. The period between the Labor Day and election day is usually a really volatile period. It can go both ways, and you have to be a bit careful in here, especially with valuations where they are right now.